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Africa and the European Economic Community

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 1966
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Arnold Rivkin

THE AFRICAN relationship with the European Common Market began with the Treaty of Rome itself. This is the Treaty which, in 1957, created the European Economic Community (EEC) and provided for the initial association of the “overseas countries and territories” of the signatory states. Most of the “dependent overseas territories,” 14, were in French Africa; 3 were in Belgian Africa; and one, the UN Trust Territory of Italian Somaliland, was under Italian jurisdiction. (There was also a scattering of Dutch and French holdings in America and in the Pacific area.)

The original association was arranged by the European powers, on the initiative of the French, on behalf of what were then their colonies. By 1962, the situation had altered drastically. All the associated African territories were by that time independent states. The new Convention of Association, which was agreed and initialed by the European Six and the African Eighteen on December 20, 1962, was arrived at only after hard and lengthy bargaining between the Six and the Eighteen. Whatever the nature of the original association, the current African association with the European Common Market is purely voluntary.

The Yaoundé Convention, which governs the new association, became effective on June 1, 1964 and is to run for five years. This opened the door to “association” much more widely—to any African state that might want to be “associated.” It was this important “open door” policy that led to Nigeria’s negotiations for association. However, the Nigerian agreement in principle will probably take a year or more from the date of the agreement to be incorporated in a final accord ratified by the EEC and the parliaments of those members of the European Six requiring such ratification. The agreement is to run through May 31, 1969, so that its time cycle can be coordinated with that of the Convention of Association of the Eighteen and the Six, and so that the whole subject of African association with the EEC, which takes on an important new dimension as a result of the pending Nigerian agreement, can, when the time comes, be reviewed in toto.

African Countries Associated with the EEC

Trade Expansion

What the associated African countries gained from the Treaty of Rome was trade preference from the Six, and this, under the Yaoundé Convention, is what they keep. Under the Convention, certain products of the Associated African States—including cocoa beans, coconuts, coffee, pineapples, tea, un-ground cloves, unground nutmeg, unground pepper, and vanilla—are given immediate duty-free entry into the European Common Market. The same tropical commodities coming from nonassociated countries will have to surmount an EEC tariff. This may seem a bleak prospect for nonassociated countries; the Six have recognized this and brightened it considerably by reducing the tariff rates on the key tropical products, cocoa, coffee, and tea. In addition, as an outgrowth of the negotiations of the United Kingdom for membership in the EEC, duties on certain products—various tropical woods—were “temporarily suspended,” and exports of these commodities from all countries enjoy duty-free entry into the Common Market area.

Thus, as part of a package deal, duty-free entry from the Associated States was accelerated, coming into force earlier than contemplated under the Treaty of Rome, and the rate of tariff protection on key commodities was lowered simultaneously. In a related move, the Associated States are, under the Yaoundé Convention and for the first time, receiving specific financial aid to increase their agricultural efficiency and improve their capacity to compete in world markets.

The exports listed above are not the only ones that benefit; there is to be a general progressive abolition of duties on tropical primary products and on manufactured goods originating in the Eighteen; the same commodities originating in nonassociated countries will be subject to a common external tariff.

The Associated States, for their part, are to reduce their tariffs on imports from the EEC by 15 per cent annually—in principle; in practice, the Associates will be allowed to maintain old tariffs or create new ones to protect infant industries or for revenue purposes.

Quota restrictions on imports, which the Community countries are in the course of removing among themselves, will be removed at the same rate for the Associated States. In return, no later than four years after the new Convention comes into force, the Associated African States are to abolish all the national quantitative restrictions on Community products (which have heretofore operated to favor the former colonial powers) and to replace them with quotas open to all the Community States without discrimination. This will, for example, facilitate the entry of equipment and machinery from the Federal Republic of Germany into former French West Africa. But here again, as with tariff reduction, the Associated States’ developing industries will be protected. And quotas may still be imposed for balance of payments purposes.

One characteristic is of great importance: the Convention is not exclusive of other arrangements. It does not prevent the maintenance or establishment of customs unions or free-trade areas between the Associated States, or between Associated States and other States, if such arrangements are in harmony with its own arrangements. There is nothing in the Convention that would prevent the creation of an African common market or markets.

How is Nigeria to fit into this framework? Most Nigerian exports will have free entry into the Common Market, but some of the most important, cocoa, peanut oil, palm oil, and plywood, will enter duty-free only in amounts equal to an average of the Six’s imports of them over the three-year period 1962-64. These quotas are to increase by 3 per cent in each year of the agreement. Imports in excess of the quotas will be subject to normal duties, ranging from 5 to 15 per cent. In return, Nigeria is to provide free entry, which will result in preferential treatment, for 26 exports of the Six to Nigeria, subject to the usual right to impose duties or quotas to protect infant industries or for revenue purposes. The goods in question represent a relatively unimportant percentage of Nigeria’s total imports and of total exports from EEC countries to Nigeria—4 per cent and 8 per cent, respectively. Aside from impairing Nigeria’s traditional nondiscriminatory trade policy, particularly vis-à-vis the United Kingdom (which accords Nigeria certain trade preferences under the Commonwealth trade arrangements) and the United States, the trade preferences are not expected to have a very far-reaching effect. There are no provisions requiring Nigeria to remove or reduce tariffs or quota restrictions on other EEC exports.

Economic and Social Development

One of the institutions created by the Treaty of Rome, the European Development Fund for Overseas Countries and Territories—generally referred to as the European Development Fund—has hitherto been administered by the Commission of the EEC. Under the Yaoundé Convention, the Commission will now administer the Fund “in cooperation” with a group, generally referred to as the European Development Fund Committee, of national representatives of the Governments of the Six. Moreover, a joint Council of Association of the EEC Commission, the Six, and the Eighteen shall “lay down the general pattern for financial and technical cooperation within the framework of association, more particularly in the light of the annual report to be submitted to it by the body responsible for administering the Community’s financial and technical aid.”

The Convention provides that over the five years of its life $800 million in assistance shall be provided to all the associated overseas countries and territories. Of the $800 million, $70 million is destined for non-African associated countries and territories. Of the remaining $730 million, destined for the Associated African States, $500 million is earmarked for economic and social development, investment, and technical assistance (which is now recognized as a specific type of assistance), and $230 million is earmarked to help the productivity and diversification of the agriculture of the African Associates, thus aiding them to make their way in world markets.

The $730 million of aid will come from two sources. Most of it, $666 million, will come directly from the Six. Of this latter amount, $620 million will be administered by the Development Fund in the form of grants (as the original funds of the Development Fund have been administered) and $46 million will be available for long-term “soft” loans, comparable to those of the International Development Association. The remaining $64 million of the $730 million total will be provided by the European Investment Bank (an institution created by the Six under the Treaty of Rome to finance investment within the European Community itself) from its own resources and will be administered by the Bank in an interesting new kind of “semisoft” loan. This type of loan will be for 25 years, at the prevailing rate of interest but with the possibility of arranging for “rebates” on interest payments of up to 3 per cent, with the Development Fund paying the amount rebated. Thus the Bank still charges interest at the prevailing rate and the borrowing country gets the advantage of a reduced rate; at the same time, however, the over-all total of grant funds is decreased. This provision for subsidized interest rates is an interesting forerunner of similar proposals discussed at the UN Conference on Trade and Development (UNCTAD) in Geneva in 1964.

Under the Convention arrangements, the African Eighteen will receive more grant aid than they would under the Treaty of Rome. Under the Treaty, which provides for a total of $581 million of grant aid to the dependent overseas countries and territories, at least $35 million was destined for areas outside of the African Eighteen; in practice, however, it seems that some $70 million will flow to these areas, leaving some $511 million for Africa. By contrast, under the new Convention of Association, the African countries will receive some $620 million in grants, as well as $110 million in loans, for social and economic development and agricultural productivity and diversification.

Technical cooperation or assistance is receiving a new emphasis and a new impetus. Neither the Treaty of Rome nor the Implementing Convention explicitly called for technical assistance for the Associates from the European Development Fund or from the EEC generally. But it was, in fact, provided. Both the Development Fund and the EEC found themselves more and more drawn into technical assistance (“t.a.”) activities and increasingly allocated funds for “t.a. projects” from the regular Development Fund and from the EEC’s budget.

The special assistance to aid agricultural efficiency and diversification has been divided into two categories. The first, aid to production, is essentially intended to assist producers to market their products at world prices. The second, aid for diversification, is to enable the Associated African States to achieve this aim not only in the primary agricultural sector but in industry and commerce as well. It seems likely to take the form of expanding agricultural processing industries and improving the “commercialization” of raw and processed agricultural commodities.

The agricultural aid of $230 million is to be divided among three groups of countries:

  • $15 million for those countries which agreed to meet world prices for their products by the time the Convention came into force—Gabon, Mauritania, and Upper Volta. This aid will be for diversification only.
  • $32 million for 4 countries already deemed able to sell their products at competitive prices on world markets—Burundi, the Democratic Republic of Congo, Rwanda, and Somalia. This aid will also be for diversification only.
  • $ 183 million for the 11 remaining Associated States, whose price supports are to be abolished only gradually. This aid will be for both productivity and diversification.

The aid is to be greatest at the start of the five-year term of the Convention and to decrease gradually, as the Associates’ prices become more closely aligned with world market prices. Pari passu, agricultural subsidies or surprix given by individual members of the EEC (particularly France) and by the EEC itself to the Eighteen on imports from them into the EEC area are to be eliminated.

Development assistance is thus an important element in the Yaoundé Convention. But Nigeria would get none of this; it would still stand outside this particular area of the Yaoundé framework. Under the Convention, any such assistance, had it been contemplated, could not have come out of the existing $730 million fund but would have had to be provided separately by the Six.

Investment

One of the main rights vis-à-vis their Associates that was given to the Six by the Treaty of Rome is the “right of establishment,” whereby nationals and companies of the Six are entitled to invest in and to establish commercial enterprises in the Eighteen on the same basis as nationals and companies of the former colonial power and on a basis as favorable as that on which any third country nationals may invest. Reciprocal rights are granted, under the Convention of Association, to nationals and companies of the Eighteen in the six EEC countries. These rights also provide that the movement of capital in connection with investment by the Six in the Eighteen is to be as liberal and nondiscriminatory as possible. For trade and other payments, the aim is the same.

In the pending Nigerian agreement, the provisions for investment by nationals and companies of the Six are essentially the same as those relating to investment in the Eighteen, but the provisions relating to the movement of capital are more restrictive.

The New Institutions

The Yaoundé agreement is administered by three new joint institutions—the Council of Association, assisted by an Association Committee; the Parliamentary Conference of the Association; and the Court of Arbitration of the Association.

The Council of Association, consisting of the members of the EEC Council of Ministers, the members of the EEC Commission, and a representative of the Government of each Associated State, will meet once a year, or more often if necessary. Its function is to establish the general lines of technical and financial cooperation and to survey the general operation of the Convention. Day-to-day administration will be handled by the Association Committee, consisting of one representative from each Community country, one representative from the EEC Commission, and one from each Associated State. In reaching formal decisions, the Six will have one vote, arrived at as the Six decide, and the Eighteen will have one vote, arrived at as the Eighteen decide.

The Parliamentary Conference, a joint body composed on a basis of parity of members of the European Parliament and members of the Parliaments of the Associated States, will meet once a year. The Council of Association will submit an annual report to the Conference. The Court of Arbitration will settle disputes on the interpretation or application of the Convention if the Council fails to agree.

Another departure which is not explicitly provided for, but in fact is probably as important as any of the official new institutions, is the direct access of the Eighteen to the EEC organs in Brussels. Following a precedent established by Togo on its accession to independence during the period of association under the Treaty of Rome, the Eighteen are now directly represented in Brussels by their own diplomatic missions to the EEC, speaking for themselves without the need of an intermediary.

The pending Nigerian agreement does not provide for participation by Nigeria in these new joint institutions. Instead, it provides for a special EEC-Nigerian Council of Association and a joint secretariat to oversee the operations of the agreement. This participation in limited special institutions is in keeping with Nigeria’s announced policy toward the EEC as proclaimed by the then Minister of Finance: “We want trade relations with the minimum of institutional links.”

Some Conclusions

There can be little doubt about the advantages that the Eighteen Associated States derive from their relationship with the EEC. The desire of other African States to associate, but in new ways, suggests that they see the advantages very clearly and want to share them. At the same time, they would like to limit the scope and intimacy of the relationship, particularly its political implications, and also the exchange of benefits, even though this means sacrificing some of the advantages they might receive from full association, e.g., development aid. In the EEC family, these African States would rather be cousins than brothers.

And there can be little question about the importance of the precedent created by the agreement in principle between Nigeria and the EEC. It is likely to be influential, and even paramount, in the pending negotiations of the three East African countries (Uganda, Kenya, and Tanzania) and the three North African countries (Morocco, Algeria, and Tunisia) for associate status. The Nigerian arrangement is confined to trade arrangements, with Nigeria extending minimal privileges to the Six in return for preferential trade advantages in the European Common Market area. The special EEC-Nigerian institutions, although they appear to be somewhat analogous to those of the Eighteen and the Six, are likely to be little more than an annual review of the year’s operations. The Nigerian agreement may very well become the standard pattern of limited association for other African countries.

Clearly, there are serious implications for the original African Eighteen Associated States, flowing from the pending Nigerian agreement. It seems unlikely that they would wish to extend, or that the Six would require that they extend, over the long run, more rights, minor though these may be, to the Six than Nigeria will. Will the Eighteen, however, be able to retain their advantages over Nigeria with respect to trade, development assistance, subsidies, etc., if they are permitted to reduce the reciprocal preferences that they now extend to the Six?

The renewal or renegotiation of the Yaoundé Convention, due to expire in 1969, will be a turning point in the European relationship of the Eighteen and the Six and, beyond that, of Africa and the European Common Market. If present tendencies continue, it seems to the author that the Six might seek to disengage to some extent from the special, intimate Eurafrican relationship represented by the Treaty of Rome and the Yaoundé Convention. With—possibly—the partial exception of France, this is the direction in which they seem to be moving. The Five—it would seem to the author—would like to extricate themselves from the position of appearing to favor some African states over others, and at the expense of others. They would also apparently like to extricate themselves from the necessity of contributing to the European Development Fund, confined to aid to the Eighteen, and, at the same time, to an additional series of roughly equivalent “compensatory” bilateral aid programs for the nonasso-ciated African states. They would also probably wish to free themselves from the financial burden, actual or potential, of defraying the cost of subsidies to the Eighteen for agricultural output.

France itself seems to the author increasingly to have come to accept the position of its EEC partners as the logical concomitant of its desire to dilute its special commitment to the French-speaking African countries by expanding its relationship to other African states and beyond Africa to Latin America, the Middle East, and Southeast Asia. The Jeanneney Commission on French foreign aid policy certainly recommended just such a course of action. It recommended that France “widen the net of its foreign aid,” presumably by diluting its almost exclusive emphasis on aid to French-speaking Africa.

If the author’s speculations prove correct, then it seems likely that the relationship of the Eighteen with the Six will tend more and more to approximate the Nigerian pattern, with the progressive disappearance of special advantages except for a common African trade advantage, i.e., preferential access for a growing range of goods to the European Common Market, with few if any reciprocal concessions. This puts the African developing countries quite close to the position of beneficiaries of nonreciprocal trade preferences by developed countries—a position in which the developing countries at the UNCTAD Conference argued that they should all find themselves.

If all this comes to pass, it would mean a significant unfreezing of the existing pattern of Eurafrican relationships. It would mean an important step in trade advantages for many, perhaps all, African states in the EEC area without significant reciprocal benefits to the Six. This in turn would, of course, create pressure on all developed countries to accord the same advantages to all African countries, and indeed to all developing countries. The future trade-and-aid relationship between Europe and Africa may not, after all, follow this pattern; but the Nigerian agreement, if ratified, will certainly be a turning point in this relationship.

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